Till now new tax regime GST, roll out date is July 1st but in an interview with our former finance minister P Chidambaram, said that a rush to roll out the new tax regime from July 1 could be detrimental.

There are many imperfection in the bill and several provision require amendments over the coming two years or so, according to our former finance minister P Chidambaram. Let us discuss some of the imperfection in the bill.

√ One, the multiplicity of rates

√ two, the compliance provisions

√ three, lack of clarity in some provisions , let us discuss with an example. Variation in turnover, what happens if the turnover goes above Rs 1.5 crore in one year and then falls below Rs 1.5 crore the next year and then after 2-3 years, again goes above Rs 1.5 crore.

√ Assumption of the states and the Centre that there will be a 14 per cent rise in revenue but how did they arrive at that. Why did they arrive at 14 per cent is also not clear. In normal circumstances, we should be happy even if there’s a 12 per cent increase for whatever reason.

√ July 1 deadline, if it were to happen, heavily loaded against the small and medium businesses,The bigger guys can employ talent and skills to quickly get on to GST. Businesses in the tier II and tier III towns who only have a local accountant to handle their accounts and are not yet completely familiar with electronic filing, its a huge burden on them. And they will make mistakes. when they make mistakes, the tax official descends on them and starts issuing notices and there will be a huge backlash against the trading community and the business community.

√ P Chidambaram says that most items should be under 18% rate

√ It is said that if there is a reduction in the tax rate, there shall be a commensurate reduction in the price but tax is only a factor that determines price. There could be a reduction in the tax rate but simultaneously there could be an increase in the raw material cost, there could be a rise in electricity cost, there could be a rise in various other factors that make up a price. So, this is open to abuse because the tax official will simply issue notice like he has issued notices to 18 lakh assessees in income tax and say you are indulging in anti profiteering. There is no definition of anti-profiteering, they are going to set up an authority which will devise its own procedure. It’s clearly open to abuse.

√ The second aspect is that if there’s profiteering, there are other regulators and institutions which deal with it. There’s a consumer forum and there’s Competition Commission (of India). So why should power be given to a tax official to decide something that a market should decide. As far as the tax law is concerned, its only purpose is to levy a tax and collect a tax. Why should it go beyond that and ask questions which do not fall within the purview of the tax book. For example, you levy an income tax, do you ask a doctor, how many patients do you treat for free? You levy income tax, do you ask what part of his income is he giving to charity. That is not the purpose of the tax law, nor can it be within the province of the tax official.

√ The GSTN not going through a trial run, there a chance that there could be inter-state disputes and the state-Centre disputes, a dispute between tax collector and taxpayer will be resolved by the usual assessment, appeal, revision, tribunal proceeding. But disputes between the Centre and state or state and state, there is no machinery yet. The Constitutional amendment provides for a machinery, but that machinery is not yet set up. So if disputes arise very early after GST is introduced, there is no machinery to resolve it.

The multiplicity of the rates, doesn’t that distort the original idea of GST bringing about a unified tax regime? In reply to this question P Chidambaram says that,” That’s precisely why I called it an imperfect bill,it can be made less imperfect if you put 70 per cent of the goods and 70 per cent of the services in the rate of 18 per cent. And, if you manage to push 90 per cent of the goods and 90 per cent of the services in the modal rate of 18 per cent, it becomes even less imperfect,”

12 responses to “Imperfection in GST Bills”

In my opinion The Got. is creating only panic and nothing else,
Mr. Finance Minister doing entire things without any plan and study. this type of Panic is not good in any manner.
it is complete foolishness in fixing limit of capital expenditure and Receiving amount.
If both persons are agriculturist and no need to file ITR, what about of the both agriculturist expenditure ?

It is not clearly mentioned, why implementation could be shifted to Ist Oct. These deficiency now everybody know bu how can these things postpone implementation of ACT. I think only reason to postpone could be if small and medium scale industries remain far behind in there preparation and their difficulties are genuine and acceptable.

Very good analysis by Smt Esha Agarwal. One hand we left to determine the prices like Petroleum Products and Bank Interest etc in the hand of market, and in another the Government desires to fetter the manufacturer/traders by anty profiteeriing
clause(Refer section 171 of GST Bill,2017). Both can’t move side by side. We are expecting a debate on the subject. Hope other academician shall join in the subject.
S.N.Bhattacharya

The subject matter of your article is very inappropriate, by reading it at one glance, it seems that there has been some recent notification with regard to shifting of the rollout plan of GST but on going through the article, it became clear that some political views have been highlighted, which are personal to an individual.

Selection of HSN codes creates a challenging job to small business and applicable tax rates basis the same tax officials can enjoy by sending notices which creates is undue hard ship on the assesses. Software’s/computers will not be available/cost effective to small business and creates challenging job to maintain the computerized records and produce documents/details through online. So service providers can enjoy. God only can save small retail traders.